State, federal lease sales net $15M in North Slope bids

The U.S. Bureau of Land Management received 14 bids on 160,080 acres of federal oil and gas leases in the National Petroleum Reserve–Alaska in a lease sale held Nov. 7.

Cash bonus bids totaled $898,900 from two companies. BLM is responsible for management of the federal reserve, which covers 23 million acres of the western North Slope.

BLM now holds an annual areawide every fall and plans the sale for the same day as the state’s North Slope areawide sale, Murphy said.

Twelve of the bids on leases submitted Nov. 7 were by Alaska independent NordAq Energy for tracts in the central part of the petroleum reserve. The other two bids, in the northeast part of NPR-A, were from Houston-based independent Woodstone Resources, a company new to Alaska.

Meanwhile, state officials have expressed satisfaction with the state area-wide lease sale that netted $14.2 million, also held Nov. 7. The Division of Oil and Gas opened bids at the Dena’ina Civic and Convention Center in Anchorage and received 132 bids on 122 tracts from 13 different bidding groups, encompassing approximately 310,500 acres.

In the State of Alaska lease sale, NordAq acquired 60,000 acres of offshore state leases in Smith Bay, just north of the NPR-A. Woodstone also bid for leases in the state sale.

NordAq president Bob Warthen said his company is working on an integrated exploration program for the offshore Smith Bay acreage and the company’s onshore federal leases in the reserve with a target for drilling in 2014.

The Smith Bay state leases are in shallow water. NordAq would build an artificial ice island to support the drilling, Warthen said. NordAq has also acquired onshore NPR–A leases held previously by FEX LLC, a subsidiary of Talisman Energy.

FEX has drilled exploration wells on the leases and discovered oil and gas but has not been able to do production tests on the wells. The company decided to sell its leases and leave Alaska for reasons that have to do more with changed corporate priorities than the viability of the Alaska prospects, FEX has said.

Warthen hopes to organize an exploration program that would explore Smith Bay, the onshore former FEX leases and the newly-acquired inland leases in an organized fashion. Although the FEX leases are in a part of the northern NPR-A where new leasing is now excluded, Warthen said that BLM officials have assured him that NordAq will be able to develop the FEX leases if commercial production can be established.

A pending NPR-A land management plan would also allow a pipeline from the offshore Smith Bay state leases to come ashore and possibly connect with the other NordAq leases and with a large west-east pipeline being considered by Shell, if that company’s exploration in the Chukchi Sea is successful.

Bidders in the state lease sale included North Slope major producers BP, Chevron, ConocoPhillips and ExxonMobil bidding together for two tracts west of the Kuparuk River field. There were also smaller companies and at least two new players.

The bids by the major companies were in an area where there could be an untapped extension of the Kuparuk field, industry sources familiar with the area said. The percentages of the companies in making the bids are roughly comparable to the percentages the companies hold in Kuparuk.

There is renewed interest in the western part of the central slope area since Brooks Range Petroleum discovered its small Mustang deposit and made plans to develop it. Repsol is also exploring in the area.

The Beaufort Sea sale netted the state close to $1.8 million, with Alaskan independent NordAq Energy being the most aggressive bidder for the Smith Bay acreage.

The North Slope Foothills area, which hasn’t seen any bidding in the past three years, received eight bids, all from Anadarko Petroleum Corp., which has explored in the area.

The Foothills region has seen sporadic exploration for oil and gas and several large gas prospects have been identified in recent decades.

“We are encouraged to see bidding in the Foothills region as well as the potentially gas-prone area in the southern part of the North Slope sale area, which may have an associated oil play,” said Bill Barron, Division of Oil and Gas director.